Could Zelle be the Future?
Zelle, an instant payment network backed by the biggest banks in the country, is quickly gaining traction with credit unions.
What's all this talk of Zelle?
Zelle is a popular person-to-person (P2P) payment network that can quickly and easily make instant payments. Zelle was launched in 2017 and is owned by Early Warning Services, LLC, a private financial services company owned by Bank of America, Truist, Capital One, JPMorgan Chase, PNC Bank, U.S. Bank, and Wells Fargo.
Billed as literally being a peer-to-peer network, Zelle is intended for payments to those whom the payer already knows and trusts. Zelle payments can only be sent to other Zelle registered accounts. Senders can send invitations via email to unregistered recipients urging them to sign up for the service.
Why are credit unions deploying Zelle?
Zelle has positioned itself to capitalize on some very significant trends in personal banking:
Cash is dead.
Personal checks are over.
Consumers want instant transactions with family and friends.
Zelle can be directly accessed through mobile banking apps.
Co-op Solutions has made it easy.
Cash is Belly-up?!
If you didn't know, the days of cash are over. According to a Pew Research Center study, 85% of Americans carry a smartphone: conversely, an Acorns post states that only 16% state they always carry cash. With mobile banking apps, consumers can perform almost any financial transaction, including paying bills, transferring money, and making in-store purchases. Anecdotally, many consumers would rather have forgotten their wallets at home than their cellphone. Despite those trends, cash will be with us for a long time. According to a Finopotamus post, 38% of study respondents viewed cash as the most secure form of payment. Conversely, only 10% of respondents believe mobile payment is the most secure.
Although holding a fat stack of bills is still a rush, cash has drawbacks. Cash can be lost, stolen, mangled, and burnt. Paper currency also has a shelf life: did you know the estimated lifespan of a $5 bill is 4.7 years? Eighty-seven countries have already begun the replacement of cash with Central Bank Digital Currency (CBDC) to reduce the costs associated with producing, handling, and maintaining cash.
Cash is also challenging to track on purpose. Unless a receipt is given, cash has no paper trail. It can be a significant headache for accounts payable departments. Accounts payable must monitor cash levels, reconcile bank statements, and track down missing cash. As a result, it's not surprising that most view cash as more trouble than it's worth. Conversely, by using a P2P network, users can track every transaction.
Check Minus
Personal checks are also dead. With ATM/Debit card prevalence, very few adults still carry checkbooks, let alone pens. Although Remote Deposit Capture (RDC) makes depositing checks easy, the check still has to clear the credit union before actual funds are transferred. For many people, writing a personal check is something that belongs in the past. In an era of cashless payments and mobile apps, there are now faster and more convenient ways to pay for goods and services.
I've got your money right here!
Well, frankly, members are asking for a P2P solution. Plain and simple. Members want to quickly split a meal or reimburse their friend for a shared birthday gift. They want the ease of use of cash without its hassles. Credit unions are focused on providing the best possible experience for their members, and Zelle's instant payment network fits the bill for many members.
It's on my phone already?!
Another significant influence in the adoption of Zelle in the credit union industry is its integration with Co-op Solutions. They have made Zelle available to every credit union using their shared branching network. Through an API, members can make P2P payments using their credit union's mobile app. Credit union members can view account balances, transfer funds between accounts, and then send payments to their friends and family from the same application. P2P networks such as PayPal and Venmo require users to download a separate application, connect it to their accounts, and transfer funds. And again, funding has to clear before transactions are finalized. The round trip from the credit union account to the payee may run three or four days - not exactly instant payments.
Josh Detar, Vice President of Sales and Marketing at Tyfone, Inc., sees the P2P trend accelerating well into the future. "Our projections indicate a high adoption rate for Zelle moving forward," stated Josh. Tyfone, a digital banking provider, works with credit unions to directly integrate Zelle into their platform. According to Tyfone's analytics, about 25% of digital banking users are enrolled in Zelle for our institutions that have enabled Zelle. Plus, Zelle users do an average of about 0.75 transactions per month with an average transaction size of about $250.
What's in it for me?
Integrating a P2P network is an excellent way for the credit union to attract a younger demographic. Banking expectations have changed dramatically in the past decade: consumers want to make instant payments from their pocket. Credit unions that can adapt to meet this demand will thrive in the new economy.
ESP is ready on the core side!
That is right, we already have clients using Zelle. We turned around testing and verification of transaction flow quickly to meet the needs of our clients. Currently, those credit unions using Zelle are using one of our digital banking partners, Tyfone. We are ready and our partnership integration works to the tune of thousands of transactions flowing through daily.